CEO Report: February 2018

Five risks you can avoid using data you already collect

Mark MortonYou can’t avoid collecting information about your farm, your finances, and your animals. The government wants it, the industry wants it, your accountant wants it, your buyers want it. If you are going to go to the effort of collecting data to satisfy the needs of other organisations, you may as well use the information yourself. The data our systems gather allows you to get an overview of your business, but also to drill down into the nitty-gritty of each aspect.

Take Cashbook as an example. All financial management apps solve one problem: how to record information to allow a business to comply with industry and government regulations. There may be differences in how this is achieved, they may look different, but they all share the same essential features. If all you want to do is to complete your BAS every quarter, it doesn’t really matter which you choose.

But if you want to take advantage of the financial data you collect, you need a system that can help you analyse the past and plan for the future. You need a system that can allow you to decide what to do when times are tough as well as help you understand what you have done right when business runs smoothly.

On our website, we ask six simple questions to help you determine if you need Cashbook Connect. This is because we realise Cashbook isn’t designed for everyone. It is designed to be used by primary producers and rural small business owners. This means it has features only you would want to use. Practical Systems understands the conditions you work in and the risks you face when running an agricultural enterprise.

1) Financial Risks

If you don’t know, you don’t know. By collecting data but not having the tools to analyse it, you run the risk of making the wrong decision for your farm. If you don’t ever compare your costs to your return on investment, you can never know if your efforts are worth it. This was certainly the case for Shane McGregor. A change in circumstances lead Shane to take over his farm’s bookkeeping. Previously, all fertiliser purchases were recorded as one expense item and a short-term recommendation was made to reduce cost by reducing fertiliser. When Shane took over he separated each type of fertiliser, kept an inventory, and was able to see that even though cutting costs of fertiliser would save money in the short-term, when it came to long-term results the return on investment was higher when fertiliser was used.

2) Seasonal Risks

Most industries have seasonal risks, periods of time each year where it is common to face a downturn in productivity. While this is certainly the case in agriculture, there are also longer-term trends that need to be monitored. Farmers need financial software that can help them plan and budget for the good and the bad times, no matter when they occur. Jenny and Jim Caughey faced ten years of drought soon after purchasing Cashbook Platinum. They found that using Cashbook allowed them to make tough decisions. Usually, they would try to hang on to animals as long as possible, but by budgeting and planning for bad conditions they were able to make informed decisions and know when it was the right time to sell or persist.

3) Regulatory Risks

We operate in an environment where there is increasing public scrutiny and our social license to farm is, on occasion, called to question.  A robust data process validates what we do, how we do it, and provides confidence to those who have public oversight. Agriculture isn’t suited to ‘one-size-fits-all’ products. It requires specialised processes and tools that are flexible enough to adjust to the demands of industry, regulators, the environment, and your business.

4) Risk of Human Error

You have to record accounting information, regardless of how you deal with financial management. At the basic level you need to record your invoices, expenses, and tax in order to comply with your Business Activity Statement quarterly. Whether you do the data entry every week or every few months, you still have to do it. What is the point of going to so much effort if only the tax office gets to use it?

Whenever there is a process you do repetitively, we should explore if it can be done automatically. Obviously, this will reduce the time you spend on accounts but there’s more to it. Firstly, small mistakes can lead to big problems. By automating processes you can reduce the likelihood of human error. Secondly, when you save time you spend on ‘busy work’ and prevent mistakes, you are able to invest this effort into analytical and higher-level tasks. A simple place to start is implementing Cashbook’s Bank Feed, which automatically imports your bank statement.

5) Environmental Risks

Those who work in agriculture face unique environmental factors that impact on when and where data recording occurs. Dust, glare, heat, and rain are just some of the possible physical conditions, but also accessibility, internet coverage, and existing equipment all present risks and limitations to data collection. Many of our customers have limitations in their internet capacity and need to ration their usage.

When we create our tools, we consider the environment you are operating in. Our strategy when it comes to our apps, and the industrial tools we recommend, is to consider the effect of the elements on their use. Likewise, with Cashbook, we provide you with the benefits of a cloud application without relying on internet coverage.

Mark Morton